Author Topic: How do you budget without a Miscellaneous Category?  (Read 7876 times)

babysnowbyrd

  • Stubble
  • **
  • Posts: 222
  • Age: 33
    • My Journal
How do you budget without a Miscellaneous Category?
« on: November 29, 2014, 06:27:55 PM »
I thought I've heard it somewhere around here that you shouldn't have a miscellaneous budget category.

I'm wondering how you can do that without having a ton of budget categories, with some being for just a few dollars. In my budget (I use mint.com), I already use 14-18 categories. (Some of them are split out like Gas, insurance, maintenance and repairs could all just go under "Auto" but I like to see them separately.) 

If I make a bigger, unusual purchase, I will go ahead and open a new category for that month and delete it for the next month. Ex: Visited family for Thanksgiving, bought a plane ticket. I don't want that to be under "misc" but since I don't buy plane tickets every month, the "travel" category will be retired in Dec.

But some purchases are small and don't necessarily fit into categories I already have. Ex: I almost never send things through the mail. But when I do, I'm not sure where to put the expense. Postage fees aren't "Personal Items" or "Household items" which are usually pretty good catch-all for most of the things I buy. Mint likes to categorize these as a "business expense" but that doesn't make any sense for me.

I usually use "Shopping" as my Misc category, so my budget trends might make it look like I go to the mall a lot when really it's just stuff I'm not sure how to categorize or don't want to make it it's own category. I see that the danger in having a miscellaneous category as a potential "leak" in the budget where you lose track of spending in certain areas, and I guess it might encourage you to spend more than what you should knowing that there's a "buffer" category, but I just don't see much of a way around it.

How do you guys organize your budget?

Malaysia41

  • Magnum Stache
  • ******
  • Posts: 3313
  • Age: 46
  • Location: Verona, Italy
    • My mmm journal
Re: How do you budget without a Miscellaneous Category?
« Reply #1 on: November 29, 2014, 07:00:32 PM »
I don't get the concept of retiring a category.  Just because you might spend $0 for travel one month?  I don't get that. 

Put items in categories that are close enough.  Stamps & shipping could be 'office supplies'.  But it's just fine in 'household supplies' too - as long as it's not 50% of household supplies.

When you start looking at a catch all category with caveats/asterisks/suspicion - that's the time to break out more categories - and don't retire them.  We pay property taxes 2x per year.  It's okay that 'property taxes' shows up only 2 months out of the year. 

I don't like the 'shopping' category either.  Things that fit in here are better tracked under 'clothes', 'gifts', 'household items', 'personal care', etc.  When I see items pop up here I go in and re-categorize to something more specific.

In the end, the whole point is to give you a reasonably accurate snapshot of where your money is going.  If you are not feeling like you're seeing the whole picture, you need to dial in the categories.  That may mean consolidating or breaking out new ones.  After a while you'll arrive at a happy medium.

Good luck.

babysnowbyrd

  • Stubble
  • **
  • Posts: 222
  • Age: 33
    • My Journal
Re: How do you budget without a Miscellaneous Category?
« Reply #2 on: November 29, 2014, 07:47:46 PM »
I don't get the concept of retiring a category.  Just because you might spend $0 for travel one month?  I don't get that. 


It's not just one month that will have $0. It's almost all but one. I don't want to see "Airfare" as a $0 budget category every month just because I bought a ticket once out of the last few months.

I don't know if you use mint, but it's pretty easy to delete a category off your budget for one month and add it on again later. If you look at graphs of your annual spending or other trends, the budget category isn't deleted. It's still there in your previous budget, but not cluttering up your current budget when there's no need for it.

Just curious, how many budget categories do you have? And how do you keep it (if you don't use mint also)

Zikoris

  • Magnum Stache
  • ******
  • Posts: 3331
  • Age: 32
  • Location: Vancouver, BC
  • Vancouverstachian
Re: How do you budget without a Miscellaneous Category?
« Reply #3 on: November 29, 2014, 08:48:45 PM »
We travel twice a year, so we also have two months a year that look like we went crazy on spending. My solution: Tag the offending transactions as "vacation expenses", then tick "exclude this tag from budgets and trends". I temporarily switch it back in at the end of the year when we do our annual fiscal review, since it's averaged out at that point and doesn't make Mint look weird, then POOF! It's gone again.

MDM

  • Walrus Stache
  • *******
  • Posts: 9246
Re: How do you budget without a Miscellaneous Category?
« Reply #4 on: November 29, 2014, 10:22:06 PM »
babysnowbyrd, welcome to the forums.

With a budget it's not so important that you have one, as it is how you use it. 

There are (at least) two ways to establish a budget:
1.  Start from scratch and decide how much you will spend in as many different categories as you care to have.
2.  Add up what you have spent in the past year or so, again in as many different categories as you care to have, and adjust based on how you think your spending should change in the next year.

So let's say you have a budget, however you developed it.  Now, what will you do with it?  One thing you should definitely do is track actual spending vs. budget.  Otherwise why have the budget in the first place?

If you have found that you are spending more than you think you should, now you have to take specific steps to reduce that spending.  Let's look at the extremes and see how that might work:
Option A: One category called Miscellaneous.
Option B: A large number of specific categories, accounting for every single expense no matter how small.  E.g., Bubble Gum = $0.25.  No Miscellaneous.
Option C: Enough categories to cover large chunks of spending, with Miscellaneous for "some" percentage to add up to your total spending.

With specific categories one can take specific actions, but with Miscellaneous there is nothing specific one can do.  In other words, how do you stop spending on something you don't know you are spending on in the first place?

Most people would likely choose Option C...but we still need to define "some".  There is no "correct" answer, but here's some background to support "3% or so" as a reasonable answer.
Let's say your annual spending is ~$36,000/yr.   3% of that is $1080.  If you are trying to correct a spending problem, not knowing where $1K/yr is going might be a good place to start.  But an even better place might be one (or more) of the defined categories in which you are spending more than $1080/yr.

In the end it is up to you.  Recalling one of Stephen Covey's 7 Habits, "Begin With the End in Mind," consider what you will do with your budget and the appropriate size (for you) of a Miscellaneous category may become clear.

I agree with other posters who caution against ignoring irregular expenses.  The important quantity is dollars, not frequency.

Good luck!

APowers

  • Handlebar Stache
  • *****
  • Posts: 1066
  • Location: Colorado
Re: How do you budget without a Miscellaneous Category?
« Reply #5 on: November 29, 2014, 11:23:50 PM »
I feel like we've got our budget pretty dialed down, in terms of categories at least. Anything that is a recurring expense gets its own budget line, and I just average it out over its recurrence period (for ex., we pay auto insurance every 6 months, so I take the amount and divide by six)-- then I set the budget amount as a monthly expense that rolls over unused funds.

After all the recurring expenses are done, there are the irregular but easily-classified expenses: gas, auto maintenance, food, clothing, etc.

For our more fuzzy categories I have:

Personal Care: anything health/beauty/bathroom supply related (toilet paper, diapers, medicine/first aid).
Home Supplies: anything I would consider a "household expense" (postage, leaky faucet repair, cleaning chemicals, laundry soap, towels, etc.).
Amusement: anything frivolous that we can't really justify as a need for one of the other, more legitimate categories (zoo trip, movie tickets, fancy food/restaurant, babysitter, etc.).

Malaysia41

  • Magnum Stache
  • ******
  • Posts: 3313
  • Age: 46
  • Location: Verona, Italy
    • My mmm journal
Re: How do you budget without a Miscellaneous Category?
« Reply #6 on: November 30, 2014, 12:47:08 AM »
I don't get the concept of retiring a category.  Just because you might spend $0 for travel one month?  I don't get that. 


It's not just one month that will have $0. It's almost all but one. I don't want to see "Airfare" as a $0 budget category every month just because I bought a ticket once out of the last few months.

I don't know if you use mint, but it's pretty easy to delete a category off your budget for one month and add it on again later. If you look at graphs of your annual spending or other trends, the budget category isn't deleted. It's still there in your previous budget, but not cluttering up your current budget when there's no need for it.

Just curious, how many budget categories do you have? And how do you keep it (if you don't use mint also)

I do use mint.  I've never noticed any dangling annoying $0 categories though.  Maybe I'm looking at different reports than you?  Huh.  (scratching head).

I don't know how many categories we have - lots.  My issue isn't in the report rendering, however.  The thing I try to avoid is having too many similar categories.  That can cause confusion.

1967mama

  • Handlebar Stache
  • *****
  • Posts: 2142
  • Age: 52
  • Location: Canada
Re: How do you budget without a Miscellaneous Category?
« Reply #7 on: November 30, 2014, 12:52:00 AM »

For our more fuzzy categories I have:

Personal Care: anything health/beauty/bathroom supply related (toilet paper, diapers, medicine/first aid).
Home Supplies: anything I would consider a "household expense" (postage, leaky faucet repair, cleaning chemicals, laundry soap, towels, etc.).
Amusement: anything frivolous that we can't really justify as a need for one of the other, more legitimate categories (zoo trip, movie tickets, fancy food/restaurant, babysitter, etc.).

Thanks so much for this, APowers! I am just setting up my first YNAB budget tonight and this was super helpful!

lizfish

  • Pencil Stache
  • ****
  • Posts: 794
  • Location: England
Re: How do you budget without a Miscellaneous Category?
« Reply #8 on: November 30, 2014, 04:24:35 AM »
I chucked a load of categories out of YNAB a year ago. Simplifies budgeting a lot. I think they recommend having as few cats as you can get away with but if you're trying to reduce something it should have it's own category. As someone mentioned roughly above. So if you're trying to cut down on eating out, make sure it's its own category. I guess mine is helped by the fact we have a joint budget and I have my personal budget and there's not a lot of crossover.

I have a 'personal' category which acts like a misc. if I bought stamps, it would go there. As does clothing, toiletries, anything medical, and a my personal phone bill. Unless it was to send a gift then it would go in gifts. This is probably more simple than most would have it but because I don't spend a huge amt it doesn't make sense to have a load of categories.

I think some of confusion arises because if you use budgeting software like YNAB, in the OP's example, you would prob have a 'Thankgiving/Xmas/holidays' category and be saving up for that sucker all year. Creating a label and then deleting is just record-keeping, not budgeting.

DoubleDown

  • Handlebar Stache
  • *****
  • Posts: 1989
Re: How do you budget without a Miscellaneous Category?
« Reply #9 on: November 30, 2014, 09:57:00 AM »
It's okay to have a "miscellaneous" category as long as it's not overly general or a front for throwing wasteful, unmindful spending into.

I've seen people on this forum and elsewhere with "miscellaneous" monthly budgets of $1000 - $4000! That's a front for spending money that you don't know where it's going (or don't want to admit). Personally, I've budgeted about $200/month for miscellaneous spending, and I rarely reach that amount so it gives me some wiggle room and additional savings. For example, the other day I had to renew my annual antivirus subscription ($29), and I don't have a separate category for that kind of unusual expense, so "miscellaneous" covers it.

MayDay

  • Magnum Stache
  • ******
  • Posts: 3907
Re: How do you budget without a Miscellaneous Category?
« Reply #10 on: November 30, 2014, 10:38:29 AM »
My "household misc" category includes postage.  Basically it is the catch-all for those small little things every household needs- anything at target like cleaning supplies, ziplock baggies, postage, parking garage or meter fees.  Just all those irregular little things that are part of life but individually are pretty small. 

I try to keep it to 100$ a month. 

MicroRN

  • Handlebar Stache
  • *****
  • Posts: 1020
Re: How do you budget without a Miscellaneous Category?
« Reply #11 on: November 30, 2014, 10:41:59 AM »
I do have a miscellaneous category, but that only has $25/month in it, for random little things that I find hard to classify otherwise.  A lot of unnecessary expenses get listed as entertainment.  Most other things I can find a category for.       

I use YNAB and make use of sinking funds, so categories like vacation travel stick around all year.  I budget $X into the category each month, and then when I buy that plane ticket, it comes out of the travel fund.  We also have a transportation category that includes vehicle maintenance, eventual vehicle replacement, taxes/tags, and small irregular expenses like occasional parking, tolls, or ferry fares.  Stamps are under misc, but mailing a package for a birthday or christmas goes under presents.

seattlecyclone

  • Magnum Stache
  • ******
  • Posts: 4729
  • Age: 34
  • Location: Seattle, WA
Re: How do you budget without a Miscellaneous Category?
« Reply #12 on: November 30, 2014, 11:01:33 AM »
It's okay to have a "miscellaneous" category as long as it's not overly general or a front for throwing wasteful, unmindful spending into.

This is my feeling as well. The point of budgeting and tracking your spending is to think about how you want to allocate your resources, understand how those resources have actually been allocated in practice, and think of ways to bring your actual situation closer to your ideal. When you decide to put a large fraction of your spending in the "misc" black hole, this limits the usefulness of the budgeting exercise. We get so many people who post case studies who plan on spending several hundred dollars per month on "misc" items. This is a problem because "misc" is basically saying "I don't want to bother with understanding this spending in any detail." If you don't understand it, you can't take steps to control it!

I personally track my spending in Quicken and I do have a "misc" category, but the average comes out to under $50/month. Looking back through my "misc" purchases, I see two basic categories of purchases:
1) Very rare types of purchases, in relatively small amounts. For example, in January I spent $20 on postage stamps. I still haven't used those stamps up, and probably won't for at least another year. If I used lots of stamps I would make a category for them, but it's not worth it for something I spend $20 on once every year or two.
2) Relatively small purchases that cut across categories. If I go to Goodwill and buy three shirts, I'll put it under the "clothing" category. If I buy a shirt, two books, and a soup ladle for a grand total of $10, I'm not going to pull out the receipt to apportion this purchase (including sales tax) across three different categories. Into "misc" it goes.

I don't retire categories. I realize some categories (like home maintenance and travel) often vary wildly from month to month. I'll look at these categories on a wider time period (like year over year change) to try and spot trends because any analysis on a monthly basis is not likely to be useful. I can see how these categories could be annoying for someone who is trying to stick to a strict budget on a monthly basis. I just track my spending without setting arbitrary monthly limits on things, so that's not an issue for me.

catccc

  • Handlebar Stache
  • *****
  • Posts: 1677
  • Location: SE PA
Re: How do you budget without a Miscellaneous Category?
« Reply #13 on: November 30, 2014, 09:19:17 PM »
 Usually find that everything has a home.  The closest I've come to using a misc. category was (in YNAB) creating a category for a specific expenditure (and to budget/hold funds for this infrequent expense) then hiding it after the purchase was made.  It was for a new mattress.  I guess I could have put this in a household category, but at the time it seemed to make sense.  I'd do it again.  We will likely need a new mattress at some point, and I'll just I hide it and start the "sinking fund" for it at that time.